Investing

5 Surprising Stocks to Buy Now That All Pay at Least a 6% Dividend

Lee Jackson

Published: September 14, 2020 7:22 am

Last Updated: November 4, 2020 8:17 am

Interest rates continue to plunge, and for income investors that count on dividends, these are difficult times.  With the distinct possibility that the Federal Reserve will continue to keep rates at record lows for years, the 30-year Treasury bond has fallen to a paltry 1.42% yield. Pretty small for committing capital to an investment for 30 years.

The problem for many income investors is they need higher yields but can’t risk buying junk bonds or highly leveraged closed-end and exchange-traded funds. The answer may be to look back to the equity markets, where some under-the-radar stocks have paid consistent, dependable long-term dividends for years and have been hammered.

We screened our 24/7 Wall St. research database and found five companies that all pay at least a 6% dividend and offer a reasonable degree of safety. While not intended to replace guaranteed issues like Treasury bonds or certificates of deposit, they make sense for those seeking investment income who have a slightly higher risk tolerance. While all five are rated Buy across Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

B&G Foods

This off-the-radar idea is ideal for investors that are more conservative. B&G Foods Inc. (NYSE: BGS) manufactures, sells and distributes a portfolio of shelf-stable and frozen foods in the United States, Canada and Puerto Rico. Its products include frozen and canned vegetables, oatmeal and hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot sauces, wine vinegars, maple syrups, salad dressings, pizza crusts, Mexican-style sauces, dry soups, taco shells and kits, salsas, pickles, peppers, puffed corn and rice snacks, cookies and crackers, and other specialty products.

The company markets its products under various brands, including B&G, B&M, Back to Nature, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice, Cream of Wheat, Devonsheer, Don Pepino, Durkee, Emeril’s, Grandma’s Molasses, Green Giant, Joan of Arc, Las Palmas, Le Sueur, Mama Mary’s, Maple Grove Farms of Vermont, Molly McButter, Mrs. Dash, New York Flatbreads, New York Style, Old London, Ortega, Polaner, Red Devil, Regina, Sa-són, Sclafani, Smart Puffs, SnackWell’s, Spice Islands, Spring Tree, Static Guard, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid, Victoria, Weber and Wright’s.

B&G Foods has handed out a dividend for 63 consecutive quarters since the company’s stock went public in 2004, and it has increased that dividend for 10 consecutive years.

Holders B&G Foods stock are served up a delicious 7.18% dividend. The Piper Sandler price target on the shares of $28 compares with the Wall Street consensus target of $29.33 and the closing price on Friday of $26.47.

Bank of Nova Scotia

Investors have to travel to the Great White North for this solid financial stock. Bank of Nova Scotia (NYSE: BNS) is the third-largest Canadian bank by market capitalization and the most international of the Canadian banks. In recent years, the bank has begun to consolidate operations, focusing more on Latin American countries, primarily Peru, Mexico, Chile and Colombia, and less on Asia and the Caribbean.

The company offers financial advice and solutions and day-to-day banking products, including debit and credit cards, checking and saving accounts, investments, mortgages, loans and related creditor insurance to individuals and small businesses. It offers commercial banking solutions including lending, deposit, cash management and trade finance solutions to medium and large businesses, including automotive dealers and their customers.

Bank of Nova Scotia is also involved in the provision of investment and wealth management advice, services, products and solutions to customers and advisors; wealth management solutions, such as private customer, online brokerage, full-service brokerage, pension and institutional customer services, as well as asset management business focusing on developing investment solutions for retail and institutional investors; and international banking services for retail, corporate and commercial customers.

Shareholders receive a 6.54% dividend. TD Securities has a $65 price target, which is lower than the posted consensus target of $72.27. On Friday, the final Bank of Nova Scotia stock trade came in at $41.99 per share.

This is a top financial services and insurance company, and only 15% of funds hold the shares. Prudential Financial Inc. (NYSE: PRU) is a global diversified life insurer with operations predominantly in the United States and Japan. The U.S. business underwrites and distributes annuities, life insurance, group benefits, asset management and retirement products and solutions. The international businesses primarily operate in Japan through captive agency and independent agency distribution with a focus on life insurance.

PGIM is the global asset management business of Prudential Financial, and it ranks among the top 10 largest asset managers in the world, with more than $1.4 trillion in assets under management as of June 30, 2020. With offices in 16 countries, PGIM’s businesses offer a range of investment solutions for retail and institutional investors around the world across a broad range of asset classes, including public fixed income, private fixed income, fundamental equity, quantitative equity, real estate and alternatives.

The insurance giant pays investors a 6.46% dividend. CFRA’s $80 price target is higher than the $71.36 consensus price objective. Prudential Financial ended last week at $68.12 a share.

Valero Energy

This Wall Street favorite is a very solid energy play for more conservative balanced accounts. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.

Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Investors receive a 7.08% dividend. The very bullish BofA Securities analysts have an $83 price target. The consensus target is $71.89, and Valero Energy stock was last seen trading at $46.39 a share.

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W.P. Carey

This is a larger net Lease real estate investment trust (REIT) with an incredible distribution for income buyers. W.P. Carey Inc. (NYSE: WPC) ranks among the largest net lease REITs, with an enterprise value of approximately $17 billion and a diversified portfolio of operationally critical commercial real estate that includes 1,163 net lease properties covering approximately 131 million square feet.

For over four decades, the company has invested in high-quality single-tenant industrial, warehouse, office and retail properties subject to long-term leases with built-in rent escalators. Its portfolio is located primarily in the United States and northern and western Europe, and it is well-diversified by tenant, property type, geographic location and tenant industry.

While real estate is struggling somewhat now, net lease REITs generally rent properties with long-term leases (10 to 25 years) to high credit-quality tenants, usually in the retail and restaurant spaces. “Net lease” refers to the triple-net lease structure, whereby tenants pay all expenses related to property management: property taxes, insurance and maintenance.

Investors receive a 6.11% distribution. BofA Securities has set a $77 price target. The consensus target is $76, and WP Carey stock closed Friday trading at $68.18.

Note that any or all these companies could at some point cut their dividends. With that in mind, investors have a chance to buy all five at discount pricing with huge dividend payouts. Even if a recovery in the share prices takes a while, the high dividends will make the wait more than tolerable.